JP Morgan Chase Earnings Preview: First Quarter 2009

JP Morgan Chase [[JPM]] is scheduled to report first quarter 2009 results before the market opens on Thursday, April 16. Based on our analysis, we at are expecting JPM to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $22.76 billion and EPS of $.35. This would represent a 35% increase in revenues from last year’s $16.89 billion in the same period. The current analyst consensus calls for revenues of $23.22 billion and $.32 EPS. In late February, the company announced that first quarter results were “solidly profitable even after significant additions to reserves, and the outlook for the quarter is roughly in line with analyst expectations.”


JP Morgan appears to be one of the few firms on Wall Street that has recognized the severity of the current economic crisis and is continuing to perform despite those challenges. This is a credit to their strong management team that continues to manage strategically and with a long-term focus.


During the quarter, the company also announced that they were reducing their quarterly dividend payment by 87%. This prudent move is expected to save the company $5 billion per year and yet still kept investors with a 1% dividend yield. This is just another sign of how JP Morgan is positioning itself to not only survive during this recessionary period, but to capitalize when the economy does recover. 


Share Performance

JP Morgan Chase’s shares are down 14% since the beginning of the year, which is roughly inline with the 11% decline in the Dow Jones index. In 2008, JPM was basically the only financial stock to outperform the Dow’s 34% decline, by falling only 28%.



Shares are now trading at 11x consensus 2010 EPS estimates. This is a slight premium to the relative valuations of their peer group. We continue to recommend JP Morgan Chase as our top pick within the financial industry and believe that they will be able to deliver tremendous value to long-term investors.


Recommendation: Buy with a $32 price target.


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